Question

Mega Bhd. purchased a new piece of equipment which was priced at RM400,000 from an

equipment manufacturer. Transportation costs involved amounted to RM1,000 while the

insurance against damage for the equipment while being transported to the business premises of

Mega Bhd. amounted to RM400. Installation costs amounted to RM8,600. Mega Bhd. uses the

straight line method for calculation depreciation. The equipment was purchased, transported and

installed on the same day, i.e. on the 2 January 2007.

Assume the equipment can be used for 8 years and the scrap value is estimated to be RM10,000.

The company financial year ends on the 31 December each year.

Required:

a) Write up the equipment account and provision for depreciation account for the year 2007 to

2010.

b) Show the relevant extract for the income statement and the balance sheet for the year 2007 to 2010